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| Version 1 | Version 2 |
|---|---|
| Shoppers face confusion over VAT | Shoppers face confusion over VAT |
| (about 1 hour later) | |
| Shoppers are facing the last day of the lower rate of VAT, although many retailers have said they will not increase prices on 1 January. | Shoppers are facing the last day of the lower rate of VAT, although many retailers have said they will not increase prices on 1 January. |
| VAT is set to return to 17.5% in the new year after being reduced to 15% on 1 December 2008. | VAT is set to return to 17.5% in the new year after being reduced to 15% on 1 December 2008. |
| The government cut VAT in an attempt to boost spending in the recession. | The government cut VAT in an attempt to boost spending in the recession. |
| But several retailers have said that they will delay passing on the higher rate, while others say they will absorb the cost of the increase. | But several retailers have said that they will delay passing on the higher rate, while others say they will absorb the cost of the increase. |
| The Centre for Economics and Business Research (CEBR) estimates that the 13-month tax cut helped boost consumer spending by £6.8bn, although the British Retail Consortium (BRC) says it has had a "very limited effect". | The Centre for Economics and Business Research (CEBR) estimates that the 13-month tax cut helped boost consumer spending by £6.8bn, although the British Retail Consortium (BRC) says it has had a "very limited effect". |
| However, the CEBR warned that the first few months of 2010 could be tough for retailers, as spending may be affected by the increase in VAT and rising inflation. | However, the CEBR warned that the first few months of 2010 could be tough for retailers, as spending may be affected by the increase in VAT and rising inflation. |
| Fake freeze? | |
| Supermarket giants Tesco, Sainsbury's and Asda have all said that they will delay passing on the increased rate on thousands of products. | Supermarket giants Tesco, Sainsbury's and Asda have all said that they will delay passing on the increased rate on thousands of products. |
| But Tesco has been accused of raising prices ahead of the tax rise. | |
| A report in the Daily Mail claims that Tesco, Boots and Morrisons have all increased the prices of certain items in recent weeks. | |
| Tesco told the newspaper its price changes had "no link whatsoever" to the VAT increase, while Boots said it benchmarked its prices against other retailers. | |
| Morrisons, which has not claimed that it would freeze VAT, said prices vary throughout the year "reflecting costs and promotional changes". | |
| Absorbing costs | |
| Meanwhile, Argos and John Lewis both say they will not raise prices until the end of January. | |
| Arcadia Group, which owns Topshop, Dorothy Perkins and BHS, has said it will absorb the cost of the increase in all of its stores. | Arcadia Group, which owns Topshop, Dorothy Perkins and BHS, has said it will absorb the cost of the increase in all of its stores. |
| But Marks and Spencer will raise prices on all general merchandise from 1 January and on food items on which the tax is paid from 11 January. | But Marks and Spencer will raise prices on all general merchandise from 1 January and on food items on which the tax is paid from 11 January. |
| Shoppers will not notice a difference on price tags, though, as the retailer never displayed the VAT reduction on tags, instead giving customers a 2.5% discount at the till. | Shoppers will not notice a difference on price tags, though, as the retailer never displayed the VAT reduction on tags, instead giving customers a 2.5% discount at the till. |